Antitrust laws protect competition. Free and open competition benefits consumers by ensuring lower prices and new and better products. In a freely competitive market, each competing business generally will try to attract consumers by cutting its prices and increasing the quality of its products or services. Competition and the profit opportunities it brings also stimulate businesses to find new, innovative, and more efficient methods of production. Consumers benefit from competition through lower prices and better products and services. Companies that fail to understand or react to consumer needs may soon find themselves losing out in the competitive battle.
Many consumers have never heard of antitrust laws, but enforcement of these laws saves consumers millions and even billions of dollars a year. The Federal Government enforces three major Federal antitrust laws, and most states also have their own. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for products and services.
The three major Federal antitrust laws are:
- The Sherman Antitrust Act
- The Clayton Act
- The Federal Trade Commission Act.
The following information on these laws comes from the Antitrust Enforcement and the Consumer guide.
The Sherman Antitrust Act
This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.
The Act, however, is not violated simply when one firm’s vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly.
The Clayton Act
This Act is a civil statute (carrying no criminal penalties) that prohibits mergers or acquisitions that are likely to lessen competition. Under this Act, the Government challenges those mergers that are likely to increase prices to consumers. All persons considering a merger or acquisition above a certain size must notify both the Antitrust Division and the Federal Trade Commission. The Act also prohibits other business practices that may harm competition under certain circumstances.
The Federal Trade Commission Act
This Act prohibits unfair methods of competition in interstate commerce, but carries no criminal penalties. It also created the Federal Trade Commission to police violations of the Act.
How Do Antitrust Violators Cheat the Consumer?
The worst antitrust offenses are cartel violations, such as:
• Price fixing: Price fixing occurs when two or more competing sellers agree on
what prices to charge, such as by agreeing that they will increase prices a
certain amount or that they won’t sell below a certain price.
• Bid rigging: Bid rigging most commonly occurs when two or more firms agree to
bid in such a way that a designated firm submits the winning bid, typically for
local, State, or Federal Government contracts.
• Customer allocation: Customerallocation agreements involve some
arrangement between competitors to split up customers, such as by
geographic area, to reduce or eliminate competition.
The Antitrust Division also often uses other laws to fight illegal activities that arise from conduct accompanying antitrust violations or that otherwise impact the competitive process, as well as offenses that involve the integrity of an antitrust or related investigation, including laws that prohibit false statements to Federal agencies, perjury, obstruction of justice, conspiracies to defraud the United States and mail and wire fraud. Each of these crimes carries its own fine and imprisonment term, which may be added to the fines and imprisonment terms for antitrust law violations.
SOURCE: DEPT OF JUSTICE